Raiffeisen International: Record result in 2008 despite the global financial crisis

• Consolidated profit rises by 16.7 per cent to 982 million euros
• Provisioning for impairment losses expanded to 780 million euros, up 119 per cent against 2007 level
• Increased efficiency improves cost/income ratio by 3.6 percentage points to 54.0 per cent
• Return on equity before taxes decreases by 3.7 percentage points to 22.0 per cent
• Earnings per share rise 10.2 per cent to 6.39 euros, proposed dividend: 0.93 euros per share
• Balance sheet total grows by 17.4 per cent to 85.4 billion euros
• Customer deposits increases by 9.3 per cent to 44.2 billion euros
• CIS region posts the highest regional contribution by delivering 40 per cent of the group's profit before tax; Southeastern Europe: 33 per cent; Central Europe: 27 per cent
• Customer base grows by around1 million to 14.7 million
• Focus on customer deposits and minimizing costs in 2009

All figures are based on International Financial Reporting Standards (IFRS).

Raiffeisen International Bank-Holding AG, a member of the RZB Group headed by Raiffeisen Zentralbank Цsterreich AG, posted a record profit in 2008, despite the global financial crisis. The consolidated profit (after tax and minorities) rose by 16.7 per cent to 982 million euros (2007: 841 million euros). The group's profit before tax amounted to 1,429 million euros (2007: 1,238 million euros). Earnings per share increased to 6.39 euros from 5.80 euros in 2007. A profit distribution for 2008 of 0.93 euros per share, as in the previous year, will be proposed by the Managing Board to the Annual General Meeting. If the shareholders accept, the total dividend payout will amount to 143.8 million euros.

«Despite a noticeably deteriorated macroeconomic environment, we once again managed to post record results in 2008, an accomplishment that underlines the sustainability of our business model,» said Raiffeisen International's CEO Herbert Stepic. «Although developments were generally favorable for us, in the past year we were quick to react to the cyclical downturn in the region.» In addition to applying increasingly more stringent risk criteria, Raiffeisen International sharply curtailed foreign currency lending and instituted a group-wide halt to further branch expansion and to the hiring of new employees. Staff reductions became necessary in Ukraine; the group saw itself forced to take similar personnel measures in Hungary at the start of 2009. Moreover, there will be a staff reduction in Slovakia due to the optimization of processes. «The measures aimed at raising our efficiency and expanding our capabilities that we have already implemented and those we will introduce make us confident that we are in sufficiently fit shape to kick off the year 2009 and to weather the crisis,» Stepic added.

Profit from operating activities rose 40 per cent due to interest result

Despite an unfavorable market environment worldwide, Raiffeisen International achieved its best result ever in 2008. Operating income for the full year increased by almost 40 per cent to 2,247 million euros.

General administrative expenses grew in the year under review by 21 per cent, or 449 million euros, to 2,633 million euros. General administrative expenses increased by 21 per cent in the past year, significantly less than operating income did at 29 per cent. That had a positive effect on the cost/income ratio, a key measure of bank efficiency that sets operating expenses in relation to operating income. It improved by 3.6 percentage points from 57.6 to 54.0 per cent.

Provisioning for impairment losses more than doubled in 2008

Against the background of the global financial and economic crisis, from which the CEE countries are not being spared, allocations to provisioning for impairment losses had to be raised substantially in 2008, and especially in the fourth quarter. Provisions were raised by 119 per cent, or 423 million euros, to 780 million euros, and their increase was far above growth of business volume. The risk/earnings ratio therefore climbed significantly from 14.8 to 24.1 per cent.

«The significant increase in our provisioning for impairment losses reflects the clear cyclical downturn in the fourth quarter on the one hand, and is the result of our traditionally conservative approach to loan loss provisioning on the other,» said Raiffeisen International CFO Martin Grьll.

Just under two-thirds of provisioning for impairment losses (507 million euros) was allocated for retail customers, and the rest was mostly due to corporate customers (269 million euros). The regional emphasis of new provisioning for impairment losses was in the CIS with a share of 46 per cent, or 356 million euros, which yields a risk/earnings ratio of 28 per cent for the region. Central Europe also showed an increased need of provisioning, and new allocations there of 265 million euros resulted in a risk/earnings ratio of 26 per cent. At 159 million euros, new allocations in Southeastern Europe grew significantly from the preceding year's very low level, but the risk/earnings ratio was the Group's lowest at 17 per cent.

Focus on customer deposits

In the past year, Raiffeisen International placed a particular focus on developing customer deposits, which stood at 44.2 billion euros at the end of 2008, representing a year-on-year rise of 9.3 per cent (2007: 40.5 billion euros). «I regard the fact that we were able to achieve a noticeable rise in our volume of customer deposits — despite the general sense of uncertainty in the market and the corresponding withdrawal of customers deposits this past autumn — as one of our most important achievements in the past year. This positive development reflects the high degree of trust that customers extend to the Raiffeisen brand and to our group's long-term strategy,» Stepic explained.

Customer base grew by around 1 million due to diversified network

In the retail customer segment, Raiffeisen International was serving almost 14.7 million private individuals and small enterprises at the end of the reporting period through business outlets, ATMs, and internet and phone banking. Customers had at their disposal the 3,231 branches of the largest banking network in Central and Eastern Europe, almost 6,600 ATMs, and more than 60 mortgage centers for their daily banking and financial transactions.

Outlook for 2009

Raiffeisen International expects business with corporate customers to make the largest contribution to profit before tax again in 2009. In the retail customer division, Raiffeisen International will continue to take advantage of its large branch network.

After a strong growth in lending to customers over the last several years, Raiffeisen International’s focus this year will be on enhancing its active credit portfolio and risk management. Raiffeisen International expects lending to customers in 2009 to be at the same level as the year before. In view of the unfavorable overall conditions for other forms of refinancing, the focus has shifted increasingly in the direction of customer deposits. Against this background, the company will continue its efforts to gain customer deposits during the 2009 business year.

You can access the web-version of Raiffeisen International’s annual report. A printed English-language version can also be ordered on that webpage.

Raiffeisen International operates one of the largest banking networks in CEE, covering 17 markets across the region through subsidiary banks, leasing companies and a range of other financial service providers. The group’s more than 63,300 employees service around 14.7 million customers via more than 3,200 business outlets. Raiffeisen International is a fully-consolidated subsidiary of Raiffeisen Zentralbank Цsterreich AG (RZB), which as core shareholder owns approximately 70 per cent of the common stock. The remainder is in free float, with the shares listed on the Vienna Stock Exchange. RZB is a leading corporate and investment bank in Austria and the central institution of the Austrian Raiffeisen Banking Group, the country’s largest banking group.

For further information please contact Michael Palzer (+43-1-71 707-2828, michael.palzer@ri.co.at) or Peter Klopf (+43-1-71 707-1930, peter.klopf@ri.co.at).

www.ri.co.at,
www.rzb.at

• Survey of Key Data